Can the Townhallers Be Left, Rather Than Left Behind?

The size and energy at the anti-health care reform protests last weekend were impressive. While some of the leaders are clearly racist nutballs who can’t accept that an African American is in the White House, many of the tens of thousands who showed up in Washington and elsewhere came out in response to their perception of a government that does not respond to ordinary people.

They have a basis for this complaint. It is hardly a secret that President Obama cut deals with the health insurance industry, the pharmaceutical industry, and other powerful interest groups. This may have been necessary for him to get a health package through Congress, but it’s hard to blame people for being suspicious.

Many of the protestors were not against the government playing a role in health care. In fact, one of the mostly widely expressed concerns was that the President Obama’s health care plan would worsen the quality of Medicare.

Supporters of reform believe that this reform will be a step forward in providing quality health care for everyone, but how confident can anyone be in this view? If there is no public insurance option, as is likely to be the case, how confident can we be that regulators will prevent the sort of abuses that are currently widespread in the insurance industry?

Insurance companies may not be able to deny coverage based on pre-existing conditions, but that doesn’t mean that they will necessarily pay claims. In the post-reform world many families may find they have as much trouble getting insurers to pay claims as they do today. They may also find that insurers don’t include adequate lists of specialists in network, thereby forcing patients to either incur large expenses for going out of network or wait months for treatment.

Supporters of reform believe that regulators will act to prevent such abuses by insurers, but there is not much reason for this confidence. Under any version of reform likely to pass, most insurance regulation will still be at the state level. Many state regulators do not have a good track record of reining in abuses by the insurance industry.

What do we get if the federal government requires people to buy insurance, which quite possibly would be bad insurance, and provides subsidies to do so? By definition this would mean more people have insurance, but it doesn’t mean that people will have good health care. And, in the process, we will have made the insurance industry, the pharmaceutical industry, and the hospital industry considerably more profitable.

This is an example of what was known in last fall’s presidential campaign as “spreading the wealth around,” but as is generally the case in this country, the direction of redistribution is upward. The government would be taxing ordinary people and/or requiring them to make direct payments to insurers, in order to enrich major corporations and their top executives. Certainly the townhallers have every right to be upset about being forced to give their money to the multi-millionaires running United Health, Cigna, and the rest.

This suggests two obvious options. First we can go back to the much maligned public option. As my libertarian friends used to say in other contexts: “what’s wrong with giving people a choice?” We know why the insurance industry hates the public option: they don’t like competition. But what possible reason can the townhallers have for objecting to giving people a choice? It is an option. If they don’t like it, they don’t have to eat it. Surely, someone with President Obama’s communication skills can make this point.

Suppose the insurance industry is so powerful that it succeeds in keeping the public option off the table. There is no reason to let these guys just run off with our money. There is another possible route to limit the upward redistribution of income, if not to limit abuses. We simply impose compensation restrictions on the executives of insurance companies who benefit from the public subsidies.

In other words, if insurers enroll people with a subsidy from the government, then the pay of their executives (including stock options, bonuses, executive jets etc.) will be capped at $2 million or $3 million, rather than the $30 million, $40 million or $50 million that some of these honchos currently rake in. This would be an entirely voluntary pay restriction. If the execs don’t want their pay restricted, then they don’t have to accept the public subsidies.

It is clear that most of the health care reform protestors don’t have a clear conception of the policy issues. But they do have a real basis for concern that they are about to be ripped off for the benefit of the rich and powerful. It would be nice if those of us who support reform could honestly assure them that this is not the case. Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.